UA chief executive Belinda Robinson told Lateline that measures in the budget threaten to encourage students to study overseas.

"We might start to see Australian students voting with their feet and in fact starting to consider international higher education providers," she said.

But UNSW vice-chancellor Fred Hilmer says the modelling " ... on the impact on fees of changes to cluster funding rates is based on a fundamental misunderstanding of the way the system works and does not represent the view of UNSW".

"It is up to universities, not Canberra, to decide what fees should apply to which courses. The funding by cluster is simply a way of generating a total sum of money that the Commonwealth is prepared to contribute for the teaching of Australian students in Commonwealth supported places," he said in a statement.

"The way in which those sums are distributed across disciplines is entirely up to the universities, as are the fees that a university would seek to charge on top.

"The 20 per cent cut in government funding drives an increase of 30 per cent in student contributions. As the UA paper indicates, on average the amount of funding per student is reduced by $2251.

"Therefore an average increase of $2,251 would be required to compensate. It is up to the university concerned whether a disproportionate amount comes from some faculties or whether it applies the increase of $2,251 to each course on a uniform basis.

"Nothing in the legislation impacts the university’s discretion to do this.

"Consequently statements about large increases for particular disciplines indicate what universities are considering they might do, not what they are required to do."

But he says he is concerned about some of the proposed changes though, including the changes to student loans and the size of the cut in Commonwealth funding.

"There are elements of the government package that I would like to see amended, particularly in regard to the changes to HELP, the size of the overall cut in government funding and the reduction in funding for the research training scheme," he said.

"But we need a rational debate based on facts rather than misleading assumptions."